Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia

This study examines the dynamic relationship between the volatility of stock market and macroeconomics’ volatility in Malaysia during the period of February 1991 to February 2013. For this purpose, monthly data on the KLCI stock index and a set of macroeconomic variables are used. Firstly, in orde...

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Main Authors:	Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 2014
Online Access:	http://journalarticle.ukm.my/8412/ http://journalarticle.ukm.my/8412/ http://journalarticle.ukm.my/8412/1/jeko_48%281%29-12.pdf

id	ukm-8412
recordtype	eprints
spelling	ukm-84122016-12-14T06:47:09Z http://journalarticle.ukm.my/8412/ Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor, This study examines the dynamic relationship between the volatility of stock market and macroeconomics’ volatility in Malaysia during the period of February 1991 to February 2013. For this purpose, monthly data on the KLCI stock index and a set of macroeconomic variables are used. Firstly, in order to estimate the volatility of each series, the well-known GARCH family models are employed. The empirical stylized facts in the stock indices and the macroeconomic variables are presented. Secondly, in order to investigate the causation between variables, the Toda and Yamamoto causality test through a VAR method is conducted using the volatility of stock market and macroeconomic variables. In addition, from the VAR, we generate Impulse Response Function and Variance Decomposition to track the evolution of economic shocks through the system. The result of this study shows that exchange rate volatility affects Malaysian stock market volatility considerably. Furthermore, trade openness is able to affect stock market volatility in Malaysia. These results will provide more precise information for investors, hedgers, managers and policy makers. Penerbit Universiti Kebangsaan Malaysia 2014 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/8412/1/jeko_48%281%29-12.pdf Lida Nikmanesh, and Abu Hassan Shaari Md Nor, and Tamat Sarmidi, and Hawati Janor, (2014) Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia. Jurnal Ekonomi Malaysia, 48 (1). pp. 143-154. ISSN 0127-1962 http://www.ukm.my/fep/jem/index.html
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	This study examines the dynamic relationship between the volatility of stock market and macroeconomics’ volatility in Malaysia during the period of February 1991 to February 2013. For this purpose, monthly data on the KLCI stock index and a set of macroeconomic variables are used. Firstly, in order to estimate the volatility of each series, the well-known GARCH family models are employed. The empirical stylized facts in the stock indices and the macroeconomic variables are presented. Secondly, in order to investigate the causation between variables, the Toda and Yamamoto causality test through a VAR method is conducted using the volatility of stock market and macroeconomic variables. In addition, from the VAR, we generate Impulse Response Function and Variance Decomposition to track the evolution of economic shocks through the system. The result of this study shows that exchange rate volatility affects Malaysian stock market volatility considerably. Furthermore, trade openness is able to affect stock market volatility in Malaysia. These results will provide more precise information for investors, hedgers, managers and policy makers.
format	Article
author	Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor,
spellingShingle	Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor, Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
author_facet	Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor,
author_sort	Lida Nikmanesh,
title	Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
title_short	Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
title_full	Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
title_fullStr	Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
title_full_unstemmed	Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia
title_sort	causal relationship between the volatility of stock market and selected macroeconomic variables: case of malaysia
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	2014
url	http://journalarticle.ukm.my/8412/ http://journalarticle.ukm.my/8412/ http://journalarticle.ukm.my/8412/1/jeko_48%281%29-12.pdf
first_indexed	2023-09-18T19:52:21Z
last_indexed	2023-09-18T19:52:21Z
_version_	1777406303102042112

Causal relationship between the volatility of stock market and selected macroeconomic variables: case of Malaysia

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